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What will the 50,30,20 style of budgeting do for you and what are the downsides?

What are the pros and cons of proportional budgeting?

1st August 2023

Have you heard about this 50,30,20 rule when it comes to budgeting?

So the short story is, Senator Elizabeth Warren in the states in the early 2000's wanted to make savings & investments available to all Americans regardless of their wealth. She suggested a way of portion controlling all household income in the same way to make it equitable & doable:

50, 30, 20 budgeting rule

50% of the household income goes out on all the essentials. Rent, bills, food, kids essentials, commuting etc

30% goes out on all the things you WANT to spend your money on

20% goes into savings, and investments for your future self.

I don't know about you but I've never been able to afford 20% of my income to be saved even before the cost of living crisis!

However, something is always better than nothing and what I didn't always do as well as I wished I had, was to have some money going into savings. Even £10 on those really tight months keeps you in the habit of putting something by & taking care of yourself in the months & years to come.

So what is your portion control like?

Have you created your budget in this way and know what your Income, Needs, Wants & Savings budgets are each month?

You'll find it super quick & easy by using the spreadsheet as shown above - just click the picture

This is by far my personal favourite in terms of creating a budget for 3 main reasons:
  1. It's simple

  2. Your pot of money for the things you want is easy to define & you can set up a direct debit into another account so that you always know exactly how much you have to spend on non-essentials

  3. It doesn't go into too much detail about the things you want so you can have an overall budget & spend it how you like. When it's gone it's gone basically but keeping it separate from your main account gives you the visibility you need when making a spending decision.

However, it might not be the best option for you for these 3 main reasons:

  1. It's not detailed enough! If you need to create mini budgets for the things you want to buy you'll need to add a layer of detail in. No biggie, totally doable but it takes you down another layer that other methods are designed to do. For example, you might want to create a clothes budget - if you think you spend too much on clothes which prevent you from having new home things, this is a good idea! It gives you a guideline that suits your ideal lifestyle. You're parenting yourself!

  2. Your portions might be very different - so whilst technically this makes it a method that doesn't work for you, in principle it still does. Your portions right now might be 75, 25, zero, especially in this cost-of-living crisis where mortgages & rents plus bills are insane. If your season of life is that you're starting out & saving like crazy for your first home you might spend your income like this; 20, 15, 65! It doesn't really matter how you slice your cake, as long as it caters for everyone Mainly it provides a system to follow when managing your money can seem chaotic.

  3. Some months will naturally fluctuate so it can be easy to get hung up on the "rule" instead of using it to simplify. If you start out with your annual income, & decide what it could look like you can then map out your month by month which will need to be flexible, & still have your year come in as you wanted.

"An hour of planning can save you 10 hours of doing"

~Dale Carnegie

When you look at your diary, look at your renewal dates for bills, look at large expenses coming up like birthdays - getting them in your budget for those months with approximate costings can change your financial life!

Do not budget month to month.

Do 6-12 months' worth in front of you.

They will change BUT you've at least got a solid plan so that you don't keep getting "unexpected" expenses ruining your budget so you reach for the credit card you're trying so hard to pay off.

It's the best chance you have of keeping your financial wellbeing stable.

What do you think of these?

Please give this a ⭐️ rating & pop your comments in!

Love from

Lucy x

PS. Make your life easier in 3 ways today.

  1. Buy this toolkit to get you set up

  2. Book me to mentor you through it so it's all set up in an hour - this includes the above template

  3. If you're UK based, let me look at your household bills & see how combining them into one UW account how much cheaper they are & more easy to budget with.

Here are the links:

Pink illustration of a leaf to indicate end of blog

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